Wednesday, September 3, 2008

Morgan Stanley's Roach Says Slump Has Only Just Begun

The global economic downturn has only just begun, with the U.S. heading into a recession and the impact of the credit crunch still to be fully felt, said Stephen Roach, Morgan Stanley's Asia chairman.

``There's more to this macro event than just the credit- market contagion itself,'' Roach said in an interview with Bloomberg Television in New York today. ``Maybe two-thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.''

Growth in the U.S., the world's largest economy, is likely to weaken in the second half after a stronger-than-forecast second quarter as rising unemployment and falling home values crimp consumer spending. That will hurt European and Asian exports and hamper the global expansion, according to Roach.

``We're in the early stages of the downturn in the U.S. and global business cycle,'' he said. ``As the U.S. consumer goes into post-bubble funk, Asian exporters will feel it. That's certainly evident now in China and it's spreading through developing Asia.''>>>MORE

...Economist David H. Wang told BloggingStocks Wednesday Roach's analysis and comments should not be ignored by executives, small business owners, or typical citizens as they set their budgets and financial plans for the year ahead.

"Of course, we are in an election year in the United States, when the rhetoric from politicians is fast and loose, and it can confuse investors. So Roach's comments on global conditions are both pertinent and valid, in my interpretation of the data. Asia exports are likely to slow, Europe will likely accompany the U.S. in a recession, and global growth will fall below 3%," Wang said. "And we have serious concerns regarding what will get the U.S. economy out of its funk. We haven't been able to identify a catalyst, a point that Roach also makes. So the economic doldrums are far from over, both in the U.S. and globally."...